1. LEARNING UNIT 6 CONTRACTING ON BEHALF OF AN ENTERPRISE

2.  Sole Proprietor  Partnership  Company  Close Corporation FORMS OF BUSINESS ENTERPRISES

3.  Not a separate entity  Owner of business concludes contracts  Rights & duties of contract is owners responsibility  Owner can use an Agent to act on their behalf SOLE PROPRIETOR

4.  Exists independently of partners  Partners conclude contracts  Partners can have separate estates therefore special rules apply PARTNERSHIP

5.  Each partner can perform any act  This falls within the partnership business  Such act binds all partners  Each partner representing co-partners = MUTUAL MANDATE  Can be excluded between partners  Then such partners will not conclude other contracts MUTUAL MANDATE

6.  A partner concludes a contract on behalf of partners  All partners are jointly responsible  Third party can sue all partners & recover debt from partnership assets  If partnership assets do not cover debt, then can be claimed from partners personally  Partners can then claim their portion from the partner that concluded contract JOINT & SEVERAL LIABILITY

7.  Company exists separately from its members  Members = Shareholders + Owners  Own assets  Shareholders not responsible for debt  Limited liability – they will only lose what they invested in company COMPANY

8.  Legal acts a natural person can do but a company cannot  Capacity of company = founding documents THE CAPACITY OF A COMPANY

9.  Acts that fall outside the company were invalid in the past  This resulted in ULTRA VIRES DOCTRINE  Outside companies not assured of contract validity THE ULTRA VIRES DOCTRINE

10.  Courts used this doctrine for the above  Contract with a company, you should know the company constitution (founding documents)  Memorandum of Association & Articles of Association of a company are available for public view THE DOCTRINE OF CONSTRUCTIVE NOTICE

11.  No company act can be invalid  If a company’s main object is to buy & sell shoes & they contract to buy clothes, the contract is still valid even though they exceeded their main objective  Ultra Vires contract becomes valid SECTION 36 OF THE COMPANIES ACT

12.  Famous rule from Royal British Bank  Before directors could borrow money from company  When lender sued company for money, company said that it was not bound to a contract  Court said company bound because the lender did not know internal company rules  Outsiders expected to know content of public documents & not internal rules THE TURQUAND RULE

13.  Exists separately from members  Has its own assets & liabilities  Members not responsible for debt  Ultra Vires Doctrine does not apply  Each member has power to bind corporation to contract Member’s power is limited CLOSE CORPORATION

14.  Revision Exercise Page 85  Questions 1 – 9  We will check on Friday, 19 October 2012 HOMEWORK